District Court New South Wales

• Medium Neutral Citation: Younan v GIO General Limited (ABN 22 002 861 583) (No. 2) [2012] NSWDC 149
• Hearing dates: 14 September 2012
• Decision date: 14 September 2012
• Jurisdiction: Civil
• Before: Gibson DCJ

Decision

(1) The plaintiff's and Mr Raymond Younan's application to adjourn the hearing of this application are dismissed.

(2) The plaintiff and Mr Raymond Younan are jointly and severally liable to pay the whole of the costs payable to the defendant by the plaintiff as set out in order 2 of the orders of 29 June 2012.

(3) The defendant's costs are to be assessed and payable by the plaintiff and Mr Raymond Younan on an indemnity basis and are to include the costs of investigating claim 7811004845, the costs of the adjournment application made today, and the costs of the defendant's notice of motion.

• Catchwords: COSTS - application for costs against a non-party - application for indemnity costs against both the plaintiff and the non-party
• Legislation Cited: Civil Procedure Act 2005 (NSW), s 98; Supreme Court Rules 1970 (NSW), Pt 52A r 4; Uniform Civil Procedure Rules 2005 (NSW), rr 42.2 and 42.3
• Cases Cited: Arena Management Pty Ltd (admin appted) (rec and mgr appted) v Campbell Street Theatre Pty Ltd [2011] NSWCA 128; ASIC v Lindberg [2012] VSC 332; Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39; Flinn v Flinn [1999] 3 VR 712; FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340; Friendly Inn Holdings Pty Ltd v St George Bank [2012] NSWSC 441; Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429; Ipex ITG Pty Ltd (rec and mgrs appted) v Melbourne Water Corporation [2012] VSCA 169; Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; Kebaro Pty Ltd v Saunders [2003] FCAFC 5; Knight v FP Special Assets Ltd (1992) 174 CLR 178; Leichhardt Municipal Council v Green [2004] NSWCA 341; Magill v Magill [2006] HCA 51; May v Christodolou [2011] NSWCA 75; Naomi Marble & Granite P/L v FAI & All Risks Management P/L [1998] QSC 18; Nocton v Lord Ashburton [1941] AC 932; Symphony Group PLC v Hodgson [1994] QB 179; Yates v Boland [2000] FCA 1895; Younan v GIO General Limited [2012] NSWDC 67
• Texts Cited: -
• Category: Costs
• Parties: Costs Applicant/Defendant: GIO General Limited (ABN 22 002 861 583); First Costs Respondent/Plaintiff: Jennifer Younan; Second Costs Respondent: Raymond John Younan
• Representation: Costs Applicant/Defendant: Mr B Burke / Mr D Courtenay (solicitor); First Costs Respondent/Plaintiff: Mr A Sandroussi (solicitor); Second Costs Respondent: No appearance; Costs Applicant/Defendant: Courtenay & Co Solicitors; First Costs Respondent/Plaintiff: AYS Legal; Second Costs Respondent: No appearance
• File Number(s): 2010/366490
• Publication restriction: None

Judgment

1 HER HONOUR: The defendant/costs applicant, by notice of motion filed on 8 May 2012, seeks orders as follows:

(1) That the plaintiff pay the defendant's costs of and incidental to the proceedings.

(2) That Mr Raymond Younan pay the defendant's costs of and incidental to the proceedings.

(3) That the defendant's costs awarded above be assessed and payable on the indemnity basis.

(4) That for the purposes of assessment the costs of and incidental to the proceeding include the costs of investigating insurance claim 7811004845 in respect of an incident on 1 August 2010.

(5) In the alternative that the defendant's costs, to be payable by the plaintiff and or Mr Raymond Younan be assessed and payable on a party/party basis up to 24 February 2011 and thereafter be assessed and payable on the indemnity basis.

(6) Such further orders as the Court sees fit.

2 These were proceedings for damages for breach of contract. The defendant refused to pay an insurance claim for the agreed value of the plaintiff's vehicle, which became a total loss after it was damaged by another vehicle. On 27 April 2012 I made orders in Younan v GIO General Limited [2012] NSWDC 67 as follows:

(1) Judgment for the defendant.

(2) Plaintiff pay defendant's costs.

(3) Liberty to restore in relation to costs.

(4) Exhibits retained for 28 days.

3 What the defendant seeks is a departure from r 42.2 Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") in two respects, namely that the costs be paid by a non-party, Mr Younan, and that the whole or part thereof be paid on an indemnity basis.

4 The plaintiff did not file any written submissions by the due date (7 September 2012) resisting the making of costs orders against her, but her solicitor, Mr Sandroussi, has made an application today for an adjournment. That application is dealt with in more detail below. She has not complied with any of the timetables for the filing of submissions and evidence.

5 Mr Raymond Younan, who joins the plaintiff in seeking an adjournment of this application, has not appeared in court today, but has sent a copy of a certificate from the Children's Hospital concerning the admission of his younger child to hospital last night. Mr Raymond Younan and the plaintiff, Ms Jennifer Younan, have two children, the younger of whom is four months old.

6 I shall first briefly outline how the application for an order for costs against him personally was brought to the attention of Mr Younan.

The procedural history of this application

7 When the defendant's application was before the court on 15 June 2012 for directions, I ordered the service of written submissions by 25 June, to be served on both the plaintiff and on Mr Younan, who did not appear. The application was adjourned to 28 June, when Mr Younan was present, but unrepresented, and then to 20 July, when a Mr Majdoud from Oxford Lawyers appeared on behalf of Mr Younan. On 20 July a timetable for submissions from both Mr Younan and the plaintiff, in reply to the defendant's submissions served upon them, was put in place.

8 Mr Younan failed to appear on 15, 20 and 28 August 2012, and Oxford Lawyers, on 19 August 2012, advised they were not retained to appear. The plaintiff's solicitor has continued to appear on her behalf. Neither the plaintiff nor Mr Younan has complied with the timetable for service of submissions and evidence.

9 Affidavits of Mr David Paul Courtenay sworn 25 June and 16 August 2012, attaching correspondence with Mr Younan and information about a subpoena served on the plaintiff's solicitors have been filed in court. The contents of the correspondence attached to these affidavits make it clear that Mr Younan is well aware both of the nature of the application before the court and of the consequences of his failure to comply with the timetables for submissions in reply.

10 While the courts have not required a non-party to be warned that a costs order will or may be sought against him in a specific formal way, the requirements of natural justice mean that Mr Younan should be made aware of the precise nature and extent of the basis upon which the costs orders are sought (May v Christodolou [2011] NSWCA 75). Both the notice of motion and Mr Courtenay's clear and helpful submissions make the defendant's position clear. In addition, as is set out in more detail below, correspondence warning of the possibility of the seeking of such an order was sent to the solicitors for the plaintiff prior to the hearing (early notice being considered advisable by the court in Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429).

11 Against this background of total non-compliance with court orders, the respondents to the motion today seek an adjournment of the hearing date. The defendant was not given any prior notice of this application, although it appears that Mr Sandroussi and/or Mr Younan sent some notification to the solicitor for the defendant very late last night.

The application for adjournment of this costs application

12 Mr Sandroussi, on behalf of Ms Younan, who is his client, advised the court that when he sought an extension of time for his client to file evidence and submissions on 28 August 2012, he did not know that his client had left that day on a two-week holiday with Mr Younan and their children to Thailand. They did not return from Thailand until 12 September 2012, and on 13 September 2012 Mr and Ms Younan's younger child became sick and had to be taken to the Children's Hospital. As a result, he had been unable to obtain instructions or to brief counsel.

13 Mr Sandroussi telephoned his client between 28 August and 5 September but her mobile phone rang without reply. He then contacted Mr Younan's parents, who advised Mr and Ms Younan were on holiday with their children in Thailand. He sent an SMS message to Ms Younan on her mobile phone, in relation to a legal professional privilege issue concerning documents sought on subpoena, and she answered this, advising that she would waive privilege and also that she was on holiday in Thailand. Mr Younan also contacted Mr Sandroussi by SMS from Thailand, but he was unable to advise Mr Younan because of the obvious conflict of interest.

14 Mr Sandroussi said he was surprised his client would go on holidays at such a time, and that his intention had been to come to court to seek leave to withdraw as the plaintiff's solicitor. He had, however, received a telephone call from Ms Younan yesterday, saying how sick her child was, and decided instead to appear on her behalf today in order to seek an adjournment.

15 Mr Younan's letter to the solicitors for the defendant dated 13 September 2012 (which I note has no address on it) was as follows:

"Dear Sirs,

RE: Hearing on 14 September 2012

I hereby put you on notice that I intend to apply to have the hearing adjourned in order for me to have a legal representative prepare submissions in reply in this matter.

I was unable to obtain proper legal representation for the following reasons:

1. Since June 2012, I had a pressing situation arising as my new born son was diagnosed with a disease affecting his bowels and needed continuous care and hospital attendances.

2. At the same time, on or about 2012 [sic], my elder son who is currently three years old fractured his leg and also needed urgent attention.

3. While the above was occurring, I also had to prepare for an upcoming trial that starts on 24 September 2012 at the District Court at Parramatta and the trial is expected to last for two weeks.

4. Because of what was occurring, I had to stand by my ex - partner Jennifer and my children at the expenses of my own personal interest which meant that I was unable to actively pursue this matter as well as the matter listed for hearing on 24 September 2012.

5. Further, my attempts to find a solicitor were made more difficult by the fact that I do not know many solicitors who deal with civil matters and those I met were asking for amounts that I [sic] simply beyond my means.

6. The above caused me and my ex - partner Jennifer to reach a stage of utter exhaustion and we were on the verge of having a nervous breakdown and the situation became such that we all needed a break.

7. Due to the above, I borrowed money from my parents and took my ex - partner and my children on a holiday overseas and we did not come back until 12 September 2012 at which time, I realised through letters that had arrived at my address that the matter is listed for final hearing on 14 September 2012.

8. I had already spoken to a solicitor from Oxford Legals [sic] however, this solicitor later declined to continue representing me and I did not have enough time to instruct another lawyer.

9. I realise now that the Orders sought in this matter are of a serious nature although I am still unclear as to their full implication and would need the time to properly instruct a solicitor to represent me in defending them.

For the reasons stated above, I will be asking the Court to grant me more time in which to prepare my defence/submissions."

16 A letter in similar terms was sent to the court by facsimile this morning at 8:47am.

"Her Honour Judge Gibson

In regards to case number 2012/00366490, I had all intentions of attending court today to inform you that Oxford Lawyers have resigned as my legal representation and I am handing the materials to my new lawyer Slattery Thompson Lawyers. Due to another matter scheduled they are unable to attend and ask if the Court can kindly adjourn the matter for mention for at least four weeks. I am not in attendance today due to my infant son being admitted to emergency last night. Sorry for an [sic] inconveniance [sic] this has caused the court.

Kind regards

Raymond Younan

14/9/2012

Followed by two attendance forms"

17 Included in this facsimile were two attendance forms at the Children's Hospital at Westmead.

18 Mr Younan has been aware of the hearing date since it was set down on 20 July when Mr Majdoud, the solicitor from Oxford Lawyers, was present. He has repeatedly failed to comply with orders to file submissions and evidence. The current hospitalisation of his younger son, following a holiday overseas, does not explain his failure to comply with timetables on foot in July and August. He and Ms Younan have been given extensions of time over a three month period to accommodate their domestic difficulties. There is no certainty that there will be compliance in the future.

19 Oxford Lawyers did not appear on 15 and 20 August 2012 and the court was informed shortly thereafter that they were not instructed. I made orders for personal service on Mr Younan from 15 August onwards for this reason. The firm of solicitors Mr Younan claims is now acting for him has not filed a Notice of Appearance or seen fit to attend to advise that they act on his behalf.

20 This pattern of repeated delays, requests for adjournments and claims of ill health occurred during the trial.

21 There must come a time when no further adjournments will be granted. This notice of motion has been listed for directions six times, in circumstances where the plaintiff and Mr Younan have both been in possession of the submissions of the defendant since 25 June.

22 The application for adjournment of the hearing is refused.

The procedure for bringing an application for costs against a non-party

23 The next question is what procedure should be adopted where a non-party is to be brought before a court in relation to a costs application, what evidence may be adduced (in terms of factual findings from the hearing) and whether these requirements have been complied with.

24 In Flinn v Flinn [1999] 3 VR 712 the Court of Appeal cited with approval a decision of Balcombe LJ in Symphony Group PLC v Hodgson [1994] QB 179. In this decision Balcombe LJ identified the procedure to be adopted, as well as setting out a category of situation in which it may be appropriate to make an order for costs against a non-party.

25 The appropriate way to conduct such an application is for there to be a summary procedure in which the proposed respondent to the motion should be fully informed of the nature of the application, as well as the basis upon which it is to be made. As is set out above, I am satisfied that this has occurred.

26 Whether or not evidence at the trial is admissible on the application is an issue for the trial judge to determine. Similarly, the issue of whether findings of fact in the judgment are admissible in the costs application is a matter for the exercise of discretion by the trial judge, having heard submissions from the person against whom the application for special costs order is sought to be made. Departure from basic principles, which would not permit the evidence or findings to be tendered against a non-party, would only be justified if the connection of the non-party with the original proceedings were so close that he would not suffer any injustice by allowing this exception to the general rule.

27 The evidence in this case points to Mr Younan as having been instrumental in effecting and arranging not only the policy the subject of the litigation but to having effectively given the instructions to run the claim and litigation. This was for his own benefit, in that he, not the plaintiff, was, in accordance with my findings of fact, the owner of the vehicle at all relevant times.

28 The evidence for this is as follows:

(a) He appears to have been the person instructing the plaintiff's solicitor, as is clear in relation to an adjournment application where instructions given to the plaintiff's solicitor became the subject of evidence (T 212-220);

(b) At T 214 the plaintiff's evidence was that she had only seen her solicitor for the first time shortly prior to the original date for commencement of proceedings, namely 22 August 2011. The solicitor has been unable to produce his file in response to a subpoena, by reason of a burglary in his office, but the memorandum of fees of Mr Di Francesco confers that he did not meet the plaintiff until 21 August 2011, the day before the trial. That was, however, also the first time he met Mr Younan. Evidence as to who instructed the plaintiff's lawyers prior to that date is difficult to determine because the plaintiff's solicitor's file was mislaid because of a robbery.

Ms Younan's evidence was that while she had had some telephone discussions with the solicitor, it was only in the week prior to the hearing that she had her first "proper" meeting with her solicitor, and that it was at this time that she was introduced to her barrister. This would suggest that the plaintiff's first meeting with her solicitor was the meeting with the barrister the day before the hearing.

(c) The plaintiff was financially dependent upon Mr Younan at all relevant times. She was impecunious and unemployed and received a supporting parent's pension. Mr Younan paid her traffic fines. She has a bank account into which Mr Younan deposits sums of monies, but she was unable to explain what these sums of monies were for. She is to all intents and purposes a woman of straw.

(d) It is not in dispute that Mr Raymond Younan was responsible for arranging the policy of insurance to protect the interest in the vehicle. However, as the owner of the vehicle, he has a financial interest in the outcome of the litigation. In addition, he was the key witness in that he gave evidence as to what was said when the insurance policy was taken out.

29 Taking all of the above into account, I am satisfied the connection of Mr Younan with the original proceedings is so close that he will not suffer any injustice by allowing reliance upon the evidence adduced in the trial.

30 Having noted these preliminary matters I next set out the applicable sections of the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules.

The legislative scheme applicable to costs applications against non-parties

31 Section 98 Civil Procedure Act 2005 (NSW) confers a general power to make costs orders against parties and non-parties alike. As set out above, following the repeal of UCPR r 42.3 (formerly Pt 52A r 4 Supreme Court Rules 1970 (NSW)), there is no specific provision restricting the making of costs orders against non-parties: Arena Management Pty Ltd (admin appted) (rec and mgr appted) v Campbell Street Theatre Pty Ltd [2011] NSWCA 128 at [24].

32 The relevant rule is now UCPR r 42.2, which provides as follows:

"42.2 General rule as to assessment of costs

Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."

33 The rule does not refer to costs orders concerning non-parties, or indeed identify who pays the costs in relation to such orders. The phrase "costs payable to a person" focuses upon the payee.

34 This rule is the equivalent of the provision reviewed by the High Court in Knight v FP Special Assets Ltd (1992) 174 CLR 178 ("Knight") in relation to an application for costs against a non-party. The High Court, in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75, explains that after the High Court decision in Knight, supra, amendments were made to Part 52:

"[24] The rule-making powers conferred by the Supreme Court Act 1970 (NSW) and by the CP Act, authorised the making of rules which may limit the powers conferred by those Acts to award costs. The purpose of Pt 52A, r 4 was the same as its precursor, Pt 52, r 4, which was introduced by amendment to the Supreme Court Rules in 1993. That purpose was "to restrict the power of the Court in making a costs order against a person who is not a party". It applies also to UCPR, r 42. As was said in Wentworth v Wentworth, the effect of the amendment was "to abolish several traditional categories of jurisdiction to order costs against non-parties" which had been discussed by this court in Knight v FP Special Assets Ltd."

35 Orders were made against non-parties in a series of cases between 1993 and 2010, notably Flinn v Flinn [1999] 3 VR 712 (CA); Yates v Boland [2000] FCA 1895; Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429 and Kebaro Pty Ltd v Saunders [2003] FCAFC 5 (approved by the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39).

The application for costs to be paid by Mr Younan

36 I shall first deal with the application for costs to be payable by Mr Younan rather than the plaintiff. In Knight, supra, the High Court upheld a decision of the Queensland Full Court, which in turn upheld a decision of the trial judge, in the making of a costs order against a non-party receiver and manager who had conducted litigation through an insolvent company. In the joint judgment of Mason CJ and Deane J, their Honours stated:

"[33] Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made (37) See the discussion in Oasis Hotel, ibid., at pp 458-459.

[34] For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made."

37 Basten JA summarised the circumstances in which orders for costs against non-parties had been made in FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 at [210]:

"[210] There may be other cases where such an order is appropriate including the circumstances of Knight v FP Special Assets itself, in which the company was in receivership. Again, that is not the present case, the primary judge expressly finding:

There is nothing to indicate that FPM is in receivership.

It is also true that the principle established in Knight v FP Special Assets cannot be limited to the specific circumstances of the case, the joint judgment having expressed a conclusion in more general terms. A further example, not encompassed by those identified to date, is illustrated by Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429, a decision of the Full Court of the Federal Court in relation to an order sought against a litigation funder. The judgment contains an extensive analysis of the case law, including consideration of the judgment of Callinan J in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406. It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria:

(a) the unsuccessful party to the proceedings was the moving party and not the defendant;

(b) the source of funds for the litigation was the non-party or its principal;

(c) the conduct of the litigation was unreasonable or improper;

(d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and

(e) the unsuccessful party was insolvent or could otherwise be described as a person of straw."

38 That decision must now be considered in light of Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75, for the reasons explained by Gzell J in Friendly Inn Holdings Pty Ltd v St George Bank [2012] NSWSC 441.

39 However, the facts of the present case are such that the criteria set down by the High Court in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd and by Basten JA in FPM Constructions v Council of the City of Blue Mountains are both satisfied.

Application of these principles to the facts in the case

40 Mr Younan was instrumental in effecting and arranging the policy the subject of the litigation. The transfer of the vehicle to the plaintiff's name was, like Mr Younan's Queensland address and driver's licence, the plaintiff's Dubbo address, and the claimed breakdown of their de facto relationship, a sham.

41 Mr Younan was the person who had conduct of these proceedings. The plaintiff only met her lawyers the day before the hearing.

42 The plaintiff is unemployed, has no assets and is a person of straw. All her debts were, and continue to be, paid by Mr Younan, with whom I have found she remained in a de facto relationship which resulted in several pregnancies, including one during the hearing.

43 In addition, the conduct of the litigation was unreasonable and improper. In his written submissions, Mr Courtenay has (in Part A) outlined 13 findings of untruthful or dishonest conduct by the plaintiff and by Mr Younan. This includes not only dishonest conduct in relation to the taking out of insurance, but dishonest evidence in court.

44 Neither the plaintiff nor Mr Younan have provided any submissions in reply to the matters raised by the defendant.

45 Taking the matters raised by Mr Courtenay into account, I am satisfied that an order for costs should be made against Mr Younan, in addition to the costs order made against the plaintiff, Ms Younan.

Application for indemnity costs

46 On 3 February 2011 the defendant forwarded a Calderbank letter inviting the plaintiff to discontinue her proceedings upon the basis that the claim would be dismissed without there being any order as to costs. The letter referred to the decision of Naomi Marble & Granite P/L v FAI & All Risks Management P/L [1998] QSC 18, where Shepherdson J made an order for costs against not only company directors but witnesses where a fraudulent insurance claim was pressed. The solicitors for the plaintiff were thereby on notice as to the potential bringing of an application for costs against a non-party.

47 The plaintiff could, up to 24 February 2011, have discontinued the proceedings without penalty. The question is whether the failure to accept the offer was unreasonable.

48 Although the offer made by the defendant did not offer to make any payment to the plaintiff, I accept Mr Courtenay's submission that it would, in the circumstances, have been inappropriate for such an offer to have been made. This impropriety was noted in paragraphs 26 of the judgment of Court of Appeal in Leichhardt Municipal Council v Green [2004] NSWCA 341:

"Therefore the only option for a defendant is not an attractive one; to "buy off" the claim by offering to pay unmeritorious claimants a sum of money to discontinue the litigation. This practice, though it no doubt occurs, is not one which the law should encourage. The policy of the law is certainly to encourage a genuine compromise, but it is no genuine compromise for a defendant to pay off a plaintiff or series of plaintiffs."

49 The defendant submits that the following factors are relevant:

(i) The offer was clear and unambiguous.

(ii) The current result, that the plaintiff pay the defendant's costs, is worse than the offer.

(iii) The current result, that the plaintiff has a judgment entered against her, is worse than the offer.

(iv) The offer was open and capable of acceptance for 21 days. There was plenty of time to make a decision.

(v) The offer was made early in the proceedings, but not so early that the plaintiff had no idea of the case she was to meet.

(vi) The offer explained the evidence to be given about the plaintiff being uninsurable by reason of her driving history.

(vii) The offer clearly dealt with and resolved in a final way all issues as to costs and any ancillary orders relating to the proceedings.

(viii) The Court has not accepted the evidence of the plaintiff.

(ix) The Court has not accepted the evidence of Raymond Younan.

(x) The lengthy trial has not served the administration of justice.

(xi) This was not one of those cases in which the plaintiff was unaware of material and relevant facts, matters and circumstances and was, thereby, unable to determine whether or not the offer was reasonable.

(xii) The plaintiff and Raymond Younan knew that she had made false statements to the insurance investigator concerning her own claim, knew her driving history was poor and had not been disclosed and both knew that they intended to provide false evidence.

50 The making of a costs order against a non-party is not limited to party/party costs. In Ipex ITG Pty Ltd (rec and mgrs appted) v Melbourne Water Corporation [2012] VSCA 169 ("Ipex") at [60]-[66] the Court of Appeal dismissed an appeal from orders for solicitor and client (not indemnity) costs to be paid by a non-party to the litigation following the making of a Calderbank offer, in circumstances where a non-party was then ordered to pay the costs. In Ipex, as is the case here, the non-party had played an active part in the litigation, had an interest in it, and knew that the plaintiff was a person of straw (at [74]).

51 Indemnity costs are sought for the whole of the litigation, presumably on the same basis as those sought in Friendly Inn Holdings Pty Ltd, supra (at [16]-[19]). Gzell J considered the degree of delinquency warranted an order against the losing party for indemnity costs, but did not warrant an order for costs against the non-party.

52 Conformably with my findings concerning the costs order sought against the non-party, Mr Younan, I am satisfied that the exceptional factual circumstances of this case, namely a series of sham transactions orchestrated by the non-party, warrant the making of an order for indemnity costs against him for the whole of the proceedings.

The investigation costs

53 The defendant submits that if a person makes a false insurance claim, it is likely that the insurance company will incur costs in the investigation of that claim. Those costs will have been incurred by reason of the deceit of the claimant and, on one view, costs incurred by an insurance company incurred by reason of the making of a false claim could have been cross-claimed as damages in an action in deceit against both the plaintiff and Mr Younan.

54 Such costs of the investigation are also capable of being regarded as costs of and incidental to the proceedings, in that they related to the claim the subject of the proceedings but were incurred at a time prior to the commencement of those proceedings. The cost of arranging for Mr Lipovac to attend upon and to interview Jennifer Younan was relevant to the proceedings, although carried out before they commenced. He was cross-examined and the transcript of his interview was tendered into evidence.

55 In a special case such as this where the plaintiff and Mr Raymond Younan have attempted to use the Court as an instrument of their fraud the defendant submits that it is appropriate for the defendant not only to be awarded its costs of and incidental to the proceedings, but that such costs include the investigation of the fraudulent conduct of the plaintiff and Mr Younan: ASIC v Lindberg [2012] VSC 332 at [159].

56 In Nocton v Lord Ashburton [1941] AC 932 at 950-955 (approved by the High Court of Australia in Magill v Magill [2006] HCA 51) the court stated:

"Derry v Peek simply illustrates the principle that honesty in the strictest sense is by our law a duty of universal obligation. This obligation exists independently of contract or of special obligation. If a man intervenes in the affairs of another he must do so honestly, whatever be the character of that intervention. If he does so fraudulently and through that fraud damages arises, he is liable to make good the damage. A common form of dishonesty is false representation fraudulently made, and it was laid down that it was fraudulently made if the defendant made it knowingly to be false, or recklessly, neither knowing nor caring whether it was true or false. That is fraud in the strict sense."

57 The investigation of the claim was, I find, inextricably linked to the later conduct of the case. The assessment of costs should therefore include the costs of investigation by the defendant, including costs incurred prior to the litigation.

Orders

58 By way of variation of orders of 29 June, orders in accordance with the defendant's notice of motion of 8 May 2012 as follows:

(1) The plaintiff's and Mr Raymond Younan's application to adjourn the hearing of this application are dismissed.

(2) The plaintiff and Mr Raymond Younan are jointly and severally liable to pay the whole of the costs payable to the defendant by the plaintiff as set out in order 2 of the orders of 29 June 2012.

(3) The defendant's costs are to be assessed and payable by the plaintiff and Mr Raymond Younan on an indemnity basis and are to include the costs of investigating claim 7811004845, the costs of the adjournment application made today, and the costs of the defendant's notice of motion.

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Decision last updated: 14 September 2012